Equivalent units

You must have an answer to this question in the same book in which you found the question (and assuming you are using a Revision Kit from one of the ACCA approved publishers, which you really must use, then you will have the workings as well). In future please do not expect me to provide full answers – ask about whatever it is in the answer that you are not clear about, and then I will help you.

There is no mention in the question of either materials or of conversion costs. It is only when separate costs are specified that you need to calculate the equivalent units for each type of cost separately.

You have not said whether they are using FIFO or average cost, and exam questions would tell you (because you will know from my lectures that it makes a big difference!!)

On the assumption they are using FIFO, then the equivalent units for the opening WIP are 70% x 200 = 140 (because there is 70% work left to finish this period.
The equivalent units for those units started and finished this period are 5,800 (6,000 – 200).
The equivalent units for the closing WIP are 40% x 300 = 120 (because 40% of the work was done this period).

So the total equivalent units are 140 + 5,800 + 120 = 6,060.

They have multiplied the closing WIP by 75% because the question says that 75% of the materials are added at the start of the process and the other 25% when they are 50% complete. Since they are only 20% complete, the other 25% of materials will not have been added.